Sebi likely to dilute compensation circular clauses for fund houses: Report

The new rules witnessed a push back from the mutual fund industry and fund houses requested Sebi to make some changes to the compensation circular citing implementation challenges. Therefore, Sebi is now mulling a rollback on certain clauses to ensure smooth implementation of the new norms ahead of the October 1 deadline, according to a Business Standard report.

In the notification, Sebi stated, "The asset management company shall invest such amounts in such schemes of the mutual fund, based on the risks associated with the schemes, as may be specified by the Board from time to time."

As per the proposed amendment, fund houses would need to invest more in riskier schemes. Sebi's notification further said that in case of violation of the new provisions, may pass an order "suspending the launch of any mutual fund scheme for a period not exceeding one year and forfeit the amount invested by an asset management company in any of its schemes". However, Sebi had maintained that no such order would be passed without giving an opportunity of hearing to the party.

Meanwhile, Sebi, in a separate notification on August 3, had clarified that it will have the right to probe the complaints received from investors and clients with regards to the rating of securities.